Profit vs. Revenue

There is an argument to be had about whether you should be focusing on profit or revenue.

My answer is both.

Profit is the money you pay yourself with, which you then pay for bills, personal expenses and savings. You need a healthy profit to live and keep running your business, otherwise it will slowly eat up all your money and leave you with nothing.

But you can't focus on profit alone by cutting down on expenses.

And without revenue, you can't even think about making a profit.

Both are important.

I'm thankful to be making $37,000 in income in 2015, even though it doesn't sound like a lot compared to the sales I made. It's not close to what I made last year, but it's still well above the median wage of an American, which is $27,000 (according to the US Census).

Do more of what works

That's why it's important to track what or who is referring you sales.

This blog, Creative Hive Co. was in its first year of business.

I was pleasantly surprised to see that it was already making a part time income.

I'm excited to do more work with you, my clients and students.

I'll be creating new programs, ebooks and courses to share what I know about making a living with your handmade business and help you make a consistent income.

Social media and PR was my winning combination in 2014 for the jewelry business.

I'll be going back to that and finding ways to scale up or convert more fans into customers.

Breaking the handmade production ceiling

In my second year going full time in 2012, I started hiring a team of production assistants.

These are people who help me make the jewelry, from start to finish.

I've seen a few people come and go but eventually found my two best assistants that I love and am happy to call friends.

You'll see later that 32.44% of my expenses was in paying my assistants (and more).

Save for a few designs that only I know how to make, my assistants take care of the majority of all production and shipping, freeing up my time to pursue sales generating activities and running my second business (this consulting one that you're on).

Cut out the fat

I made three major investments this year that unfortunately didn't pan out as well as I'd hoped:

These would have cut down my expenses by $30,000 and made revenue and expenses a 50/50 even split (similar to 2014), for a $77,000 profit.

Trade shows

In 2014, I had a super strong hold on all of my social media.

I had tons of press and features for my business.

I felt like I had done it all and was looking for the next thing to try that could potentially bring my business to new levels.

I did the National Stationery Show and the Altanta Gift Show back to back.

They were both my first trade shows and they're huge investments.

While I don't regret attending these shows, I don't think I will be doing them again.

Some artists can make an immediate profit after attending a trade show, but most people will tell you that it takes time to make back your money.

It's hard to calculate the return on investment because the sales are so hard to track.

A sale can come from a relationship you made at a trade show two years ago.

Or a store makes a small order at the trade show to try it out. She loves your product and decides to make a huge order with you six months later.

Ultimately, as a small business owner where cashflow is so important, I wanted to see a profit right away. Otherwise, it wouldn't be worth it for me to do trade shows yet.

When you're calculating profit, you need to account for the materials and labor cost to make the product, not just the trade show fees, traveling expenses and time spent manning your booth.

Unfortunately I didn't break even for either show, but I did end up having over 40 new stores!

Credit cards are not for me

I paid for parts of the trade shows with a credit card, which took me six months to pay off.

This was also my first time using credit cards for my business. While it's nice to have more opportunities with a line of credit, I hated that I had a false sense of security with money.

Now that I've cleared out the debt, I don't intend to use the credit card again.

Choose your shopping cart wisely

2015 wasn't too great on the technology side. After a fantastic year in 2014, I invested in redesigning my website and making it mobile friendly.

I was using Prestashop at the time (and had been for many years), which is an open source, self-hosted and free ecommerce platform. I like it because it's easily customizable, you have 100% control over your website and it has tons of addons you can install if you need additional features. Plus, it's free to use, so I wasn't paying a monthly fee.

All through the year I experienced technical issue after issue, including a fiasco where my shopping cart wasn't charging my customers for orders made with a credit card for two months. I had already shipped their orders to them… and they essentially received free product (and I paid for shipping). I was able to recoup most of that money back – there are still good people in this world :)

I got hit by malware twice which took my website out of commission for five days straight each time, causing me to lose traffic and credibility.

I didn't have the foresight to see that Prestashop (and my host, Bluehost) would cause so many problems for my business. Otherwise I wouldn't have planned to do the website redesign.

The redesign only lasted for a few months before I took my shop over to Shopify, which I absolutely love!

Professional marketing services cannot guarantee you results

Last year I signed a contract to work with my dream PR agency so I didn't have to do it myself. I thought a professional would get better results.

From the early days of my business, they had been on my radar. They worked with clients I admired and frequently got them in all the top national print magazines.

PR (or marketing in general) is a tricky thing to outsource because of the lead times that most magazines work with. If you pitched your products in January, you won't see the feature until June/July. And just like with your customers, magazine editors can take time to grow to like your brand.

I moved over to Shopify, which I absolutely love! It's super speedy, support is great and everything works well.

We love to cook and spend a lot of time in the kitchen. However, it was a part of our home that we felt was lacking. We upgraded our kitchen with new paint, cabinets, flooring, countertops and appliances.

We went on a cruise for the first time. We rode horses in the ocean in Jamaica, went snorkeling and rode jet skis in Haiti. It was an awesome experience and we can't wait to book our next cruise vacation!

We went to Vegas where we'd heard so many fun things about the food. It was a fun trip and the buffets are a real treat!

Even though I made far less this year, it's still a healthy income. I guess you could balance that out with all the new experiences we had with traveling.

I don't regret anything I did in 2015. It was all an amazing learning experience that will help me make better decisions in the future.

Comments

Thank you so much for sharing this! This year was my first official year in business and I did pretty well I think. I did spend a lot on products and ensuring I had enough for the holiday season – since November/December, I did over 1500 sales in two months.

I think this puts a bit into perspective, since things are not always a sure bet. (Especially when it comes to hiring outside help for marketing, craftshows etc.) I’ve been debating on if I should hire someone for next years holiday rush; I think I might just have family help me and stock up through out the year for holiday stuff. (Even though I actually had been ordering/planning since July, for this holiday season.) The money made from the holidays this year, is going to getting a bigger apartment, so I can have my official room for my office and the space to grow.

Thanks for stopping by. I’m glad to hear your Christmas went well! How exciting to be apartment hunting and moving into a bigger place.

What I’m learning from having outsourced to overseas contractors, trained in house assistants and hired professional services is the best is finding someone who you can train from the ground up. That way they are doing things in the ways you would do them, and it’s more affordable than hiring a professional.

Hey Mei, I am reading your blog for a few months now and was very impressed by your 2014 income report. The 2015 is pretty gorgeous, too. I am very curious about your planning process. Do you have a grand overall marketing and action plan for the whole year or just for a few months in advance? Would you mind writing about this? Thanks in advance. i am learning a lot from you. Right now I am going throug the facebook program. Amazing!

thank you so much for sharing this Mei! I’ve been thinking about hiring a PR and marketing professional for my Etsy shops, and I’m so glad I’ve read your thoughts and experience! In 2015 we’ve hired an assistant for the first time, and I came up with the same conclusion, it’s the best when you teach a person from ground up. It’s the only way you truly control what is happening and the business doesn’t lose your individuality. and we also moved over to Shopify and I can’t tell how much I love it. Having a self-hosted site based on WP was a real struggle. I hope 2016 will bring more sales and confidence. Good luck with your new business! I had a great time watching you at creativelive.

Thanks for stopping by, Natalka! I totally relate to all that you’re saying. The best people I’ve worked with are the ones that I trained from the ground up. If I were to outsource marketing again in the future, I would most likely go this route.

Hi Mei! Thank you SO much for sharing your 2014 and 2015 income reports!! I loved learning about the different focus you had for each year and it’s encouraging to see others take risks!! I just signed up for your challenge and can’t wait to get started!! Thanks for all you do.

I’m glad you got something out of the income reports. If anything, they’re a great reason for me to reflect on the business in the past year. The big takeaway is there was always one big focus or theme.

Thank tiy for being vulnerable and putting yourself out there. It is so hard to do. I have been in biz for 10 years. And I have had some similar experiences. One thing I love, that you might be using, is etsy wholesale. It has helped me get new accounts with very little effort.

I love your blog. It really helps me focus. I have been a big etsy seller for years, and I love shopify also, although our shop isn’t completely built out yet.

You’re most welcome, Kelley! I had a much better year the year before. The months before the year ended, I was already contemplating if I should create a income report, considering the year wasn’t as stellar as 2014. But I felt a certain sense of responsibility to share with other artists, even if this appears to not be quite a successful year for me, it’s still possible to make a healthy income.

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I'm Mei ('may') from Minneapolis. I want to help you build a sustainable, profitable handmade business that makes you consistent income and sales. I only ever teach or recommend marketing, social media, pricing, production and branding tips that I've personally used in my own handmade business and that I know work. Read More…